Starting Your Own Gas Station or Convenience Store in Minnesota

Starting a gas station can be a wonderful idea. People who think they can run their own gas station should first consider their personality, skills and talents. Small business owners need to be patient, detail-oriented, self-motivated and disciplined. A gas station brings in large amounts of money and expends large amounts of money. Therefore, an individual owner should be a good bookkeeper, mathematician, and a generally well-organized person.

The Industry

Gas stations and convenience stores are a unique business. While most of the large convenience store chains are owned by large oil companies, several, like 7-Eleven, Inc, are purely retail companies. All the chains, however, are increasingly turning towards the franchisor/franchisee model. Sixty-two percent of convenience stores are owned by someone who has only one store! It’s a great business for individual entrepreneurs to break into. Buying a gas station has some complications that are unique to the industry, like the difficulty in accurately evaluating an existing gas station. It can be hard to buy or start a gas station, but they are relatively easy to run.

What you need

First, you need to choose a location and find a property. Finding a location with the necessary driver demand for fuel and convenience store items is probably the most vital step. Because of the high start-up costs and operating costs, gas stations require a high volume of sales, or it will necessarily fail. Second, you will need licenses and permits. File all mandatory paperwork at the local state agencies; local fire departments also have requirements with which you must comply. Third, you need to choose providers. Talk to as many oil company representatives as you can and compare rates. Depending on the local gas prices, you can already be reasonably sure what you’ll be able to charge per gallon of gas, so finding the absolute best deal on a provider can be a crucial step (you’ll also need to pay taxes on the fuel). Fourth, you need to decide whether to start an independent retail store or a franchise convenience store. If you choose franchise, be very wary of the franchise agreements, which often have high demands and high risk on the franchisee. Remember, the majority of your profit will come from convenience store sales and amenities sales. Carefully consider what type of convenience store and which convenience store products will be most successful in your neighborhood. Finally, write a business plan, or hire someone to write a business plan. A thorough business plan should include the following items in great detail:

  • Description of services, products and amenities
  • Analysis of local market, competition and target clientele
  • Explanation of organization and management of the business
  • Strategy for advertising and marketing
  • Detailed financial plan with graphs, tables and charts
  • Executive summary with mission statement and objectives

If you make a good business plan, with accurate estimations of start-up costs, operating expenses and income, you will have a very good sense of whether or not you will be successful. Here is a rough estimation, not based on actual figures, of the type and a rough guess at what each type of expense might cost:

  • Legal — $2,000
  • Insurance — $2,000
  • State Permits — $3,000
  • Gas Station Setup — $100,000
  • Store Setup — $20,000
  • Promotional Sign — $5,000
  • Cash on-hand — $18,500
  • Start-up Inventory — $10,000
  • Building purchase — $150,000

In our current economic environment, it is much harder to get financing for a new or existing gas station than it used to be. Ten years ago, you could easily get an SBA secured loan with a 20% downpayment. Now, the SBA no longer lends on gas stations and banks may require anywhere from 30 to 50% downpayment. If you are buying an existing gas station, the seller may be willing to finance a percentage of the purchase price, in order to help you cover your downpayment. If you are starting from scratch, you may need to find a few personal investors.

Hypothetical

Let’s pretend that you start a gas station in Minneapolis, Minnesota. In Minnesota, it is reasonable to expect to sell gas at around a 3% mark-up from the price you pay from your supplier. Also, it is reasonable to expect about $10 in income from every $4 that you spend on convenience store products. In a single year, a relatively busy gas station might bring in $2,000,000 from gas sales and $400,000 from convenience store products sales. They would have spent $1,940,000 on buying the gas and $160,000 on buying the products. They have $300,000 of profit. Now let’s examine operating expenses. Here is an example of annual operating expenses:

  • Payroll (including your own salary) — $190,000
  • Payroll taxes– $30,000
  • Depreciation — $15,000
  • Interest on loans — $20,000
  • Utilities, Insurance — $10,000
  • Other — $10,000

This equals $275,000 in operating expenses, leaving $25,000, which should probably be applied to the principal of the original loan. Notice that a small boost in convenience store sales would greatly boost the profits. In such a case, switching coffee or donut vendors might make a crucial difference. Also, regardless of the annual profits, there is great value in organizing your business well, keeping good records, neat books and happy customers and employees. A smooth running business with a stable customer base is very valuable to potential buyers, when it comes time to sell your business.

Limiting Personal Liability

Gas Leak & Spill Cleanup Liability

Because of the uncertainty inherent in any business venture, it is crucial that the business owners limit their personal liability. Gas station owners are bound by the EPA’s Financial Responsibility Regulation, which hold owners liable for cleanup of leaks and spills from their underground storage tanks. Most owners carry insurance for these, but these policies do not completely relieve owners of liability, so the best way to reduce liability is to keep the tanks well-maintained. If you are buying an existing gas station, beware of any ignored environmental issues that you are involving yourself in; you may inherit liability for them.

Customer Injury Liability

Gas stations also carry inherent threats of customer injury. Any injury to a customer or vehicle that is caused by the gas station’s negligence or violation of statute creates a dangerous liability on the gas station. There are insurance plans to protect you against some, but not all, liability for accidents on gas station premises, but the best way to protect yourself is to regularly inspect the premises for dangers, make timely repairs, and practice good housekeeping and maintenance, including proper warning signs.

Personal Financial Liability

Owners also need to consider protecting themselves from personal financial responsibility. It is important to keep your business expenses and liabilities separate from your own, so you will need to carefully consider which type of company you want to create to minimize your risk while maximizing your tax savings.

An experienced business attorney may be able to help you limit your liability in these situations.

Gas Station Basics

Leave a Public Comment

  • Olwethu
    July 5, 2016, 7:39 am

    Hi, i am a young South African entrepreneur who wants to open a petrol station, but i am strugling with making up estimated start-up costs in my business plan. I want my station to have a Car wash, a Convinience store, 4 Restrooms and a Resturant. And it is not a franchise.

  • Shabbir Hossain
    May 20, 2016, 5:26 am

    A Gas station business is not as complex as some think. It is a good solid and profitable business for the most part, as long as you buy the right business and work at it. Most importantly it is truly a recession proof business.
    If you like to learn more about how to start, run and grown a gas station business, I would direct you to my blog at http:GAsStationBusiness101.com
    If you rather listen to my audio podcast you can find me on iTunes GAs Station Business 1o1 podcast.
    Thanks!

  • henry mark
    March 9, 2016, 8:04 pm

    Do you need a loan to pay bill or do you need money to start your own business do contact us as we give out loan as low as 2% interest rate we also give long and short time loan for more information contact us via email

  • babalwa
    February 19, 2016, 8:27 am

    If I have a good location ,can you help me build a gas station and i will pay back the money.

  • Alomaja Godwin
    November 26, 2015, 9:51 pm

    I’m a Nigerian but where I live we don’t have gas station and if We can have one gas station it will yield great income but money is the problem wat can I do?

  • Ibrar
    October 7, 2015, 2:38 am

    I have my own property how can I get assistance from big companies to build one store .. Can you email me please

  • abdelnasser
    September 25, 2015, 8:45 pm

    If I have a good location ,can you build a gas station50/50.please advice.

  • Abdi awil
    September 21, 2015, 5:19 am

    I’m looking for to open gas station in Minneapolis

  • SAFARU A MUSTAPHA
    August 22, 2015, 1:27 am

    I will be glad if you have a legal practitioner office here in Houston ,because l live here in Texas.
    My cell.number is +1-8328801822 and my mailing address is 16618,alametos dr.77083,Houston Texas .
    Hope to hear from you,if there is any document or forms to fill ,but l will prefer Exxon Mobil or any of the reputable oil industry.

  • NIKUNJ
    June 17, 2015, 10:56 am

    Hello

    I browsed the entire website and it is amazing advisory link to start with. I am planning for a gas station with convenient store in New Jersey or Virginia. I am looking for some options of the store on sale/ auction or empty plot. Can you suggest me any specific location in these cities or some other city ?
    Thanks

  • Fritz Rogenus
    April 4, 2015, 2:55 pm

    Hi I’m thinking about stating a laundry mat how much money you think I need
    in cash.

  • Phumzile
    February 26, 2015, 12:59 pm

    I am thinking of starting a gas station in South Africa at eastrand, but i dont have capital to start

  • AWIL
    February 14, 2015, 8:59 pm

    GAS STATION AND STORE IN MN

  • Ali
    October 15, 2013, 9:34 pm

    I am thinking to start a Gas station in Minnesota,what do you think the location

  • nikeita
    April 1, 2013, 8:31 pm

    I’m thinking to operate a gas station in Jamaica. Information on this website was helpful.